Weekly Economic Update: September 23, 2025

Presented by Nicholas Wealth Management

The Fed finally moves!

After the horrendous jobs revision last week of -911,000 (from March 2024 to March 2025) showed that basically the only jobs created last year were government or government-dependent (health care and education) or low-paying hospitality jobs, the Federal Reserve decided to make its first move in nine months and cut short-term interest rates by 25 basis points (0.25%).^1,2

The cut comes after months of speculation and drama with the Fed. Now that the cut is here, more are expected and the argument that tariffs will spike inflation has gone by the wayside. President Donald Trump still wants Fed Chair Jerome Powell replaced — but with markets beginning to price two more cuts by year-end, Trump should be satisfied to wait until May 2026 when Powell’s term expires and replace him with someone he prefers without upsetting markets.³

Speaking of markets, the S&P 500, Dow and Nasdaq all hit new records on Thursday and again on Friday.^4,5,6 Much of the gain was due to optimism from Magnificent Seven stocks, a potential TikTok deal and the perceived beginning of a rate-cutting cycle.^7,8

A word of caution: We still have one-third of September and all of October to navigate before we can start thinking about year-end and potential “Santa Claus” rallies.⁹ The economy is plodding along and far from robust, while jobs are weak. Plus, we have yet to see the promised economic growth kick in.

This is a good time to be reminded of the adage: “The best time to fix a leaky roof is when the sun is shining.” It’s time for an investment gut check. If you are out of your comfort zone, rebalance back to your risk targets and appropriate allocations.

China syndrome

The ongoing tussle with China continues. President Trump had a call with China’s President Xi Jinping on Friday. In a social media post following the call, Trump said the two made progress on topics including trade, fentanyl, the war between Russia and Ukraine, and a potential TikTok deal.¹⁰ He also said he and Xi would meet in South Korea at the upcoming Asia-Pacific Economic Cooperation summit early next year.

Last year, Congress passed the “Protecting Americans from Foreign Adversary Controlled Applications Act,” which was supposed to ban TikTok in the U.S. if it was controlled by the Chinese.¹¹ The Act set off a series of events — and now we have a possible deal to buy the app.

China is kind of like the guy in high school who says they’re your friend, but every time they get invited to the party they don’t show up. We’re concerned we will make no progress with China because it’s not in their best interest; they will simply wait Trump out. Then the next president or two down the line will go back to the status quo.

Coming this week

• Now that the Fed drama is out of the way, perhaps we can start focusing on economic data to get a real feel for the state of the economy. The most significant data will be the personal consumption expenditures (PCE) numbers on Friday. With jobs faltering, the health of the consumer needs to be measured and monitored very closely, especially since consumer spending accounts for nearly 70% of the economy.
• Fed speakers will make the rounds this week. Everyone will have something to say, even Powell (Tuesday). They probably won’t have anything new to say. Markets are pricing in two more cuts in 2025, tariffs aren’t spiking inflation and job growth is nonexistent.¹² What else do we need to know?
• Other data this week will include MBA mortgage applications and new home sales on Wednesday. Thursday will feature the third estimate of second-quarter gross domestic product (GDP), which is expected to remain at +3.3%.
• Finally, we’ll see consumer sentiment on Friday. Don’t expect any great news there.

Sources:

¹ U.S. Bureau of Labor Statistics. Sept. 9, 2025. “Current Employment Statistics Preliminary Benchmark (National) Summary.” https://www.bls.gov/news.release/prebmk.nr0.htm. Accessed Sept. 21, 2025.

² Jeff Cox. CNBC. Sept. 17, 2025. “Fed approves quarter-point interest rate cut and sees two more coming this year.” https://www.cnbc.com/2025/09/17/fed-rate-decision-september-2025.html. Accessed Sept. 21, 2025.

³ David Wessel. Brookings. Aug. 8, 2025. “Who has to leave the Federal Reserve next?” https://www.brookings.edu/articles/who-has-to-leave-the-federal-reserve-next-2/. Accessed Sept. 21, 2025.

⁴ Yahoo! Finance. “S&P 500 (ˆGSPC).” https://finance.yahoo.com/quote/%5EGSPC/. Accessed Sept. 21, 2025.

⁵ Yahoo! Finance. “Dow Jones Industrial Average (ˆDJI).” https://finance.yahoo.com/quote/%5EDJI/. Accessed Sept. 21, 2025.

⁶ Yahoo! Finance. “NASDAQ Composite (ˆIXIC).” https://finance.yahoo.com/quote/%5EIXIC/. Accessed Sept. 21, 2025.

⁷ Amalya Dubrovsky, Karen Friar and Laura Bratton. Yahoo! Finance. Sept. 19, 2025. “Dow, S&P 500, Nasdaq close at record highs for second day as tech, trade headlines lift markets.” https://finance.yahoo.com/news/live/dow-sp-500-nasdaq-close-at-record-highs-for-second-day-as-tech-trade-headlines-lift-markets-193428667.html. Accessed Sept. 21, 2025.

⁸ George Wright. BBC. Sept. 20, 2025. “White House outlines TikTok deal that would give US control of algorithm.” https://www.bbc.com/news/articles/c89dd747yz7o. Accessed Sept. 21, 2025.

⁹ Brian Dolan. Investopedia. Dec. 20, 2024. “Santa Claus Rally: What It Is and Means for Investors.” https://www.investopedia.com/terms/s/santaclauseffect.asp. Accessed Sept. 21, 2025.

¹⁰ John Ruwitch. NPR. Sept. 20, 2025. “Trump says talk with China’s Xi yielded progress, including on TikTok.” https://www.npr.org/2025/09/19/nx-s1-5545600/tiktok-deal-talks-trump-xi. Accessed Sept. 21, 2025.

¹¹ Congress.Gov. 118th Congress (2023-2024) “H.R. 7521 – Protecting Americans from Foreign Adversary Controlled Applications Act.” https://www.congress.gov/bill/118th-congress/house-bill/7521. Accessed Sept. 21, 2025.

¹² CME Group. “FedWatch.” https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html. Accessed Sept. 21, 2025.

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